S06.8 · Energy, Power & Climate
Systems storing electricity for grid and backup use, growing fast on renewables pairing and new datacenter backup and grid-stabilization demand.
Energy storage and battery systems — electricity storage for grid and backup use — added roughly 94 GW and 220+ GWh of capacity globally in 2025 (BloombergNEF), with market value estimated at $35-65B, a range that says more about differing scope across Precedence Research and other industry estimates than about the market itself. Annual installations have grown 25-30% historically, with forward growth driven by grid-scale storage paired with renewables plus a newer source of demand: datacenter backup and grid-stabilization needs. One variable dominates the segment's economics, and it is not on the demand side at all — cell cost, falling 15-20% a year.
China dominates cell manufacturing and deployment. The US grid-scale market is strongest in ERCOT and CAISO, both deregulated markets where storage can capture price volatility directly, while Europe's strength is residential storage, particularly Germany. The supply chain splits sharply: cell supply is concentrated — CATL and BYD together hold over 50% global share — while storage integration is fragmented across companies such as Fluence, Tesla Energy and Sungrow. Concentrated upstream against fragmented downstream means most of the segment's pricing power currently sits with the cell manufacturers, not with the companies that design, install and operate storage systems.
Storage sits alongside renewable generation and the grid, sourcing batteries from the EV and cell supply chain. Revenue mixes tolling and capacity-contract payments with merchant arbitrage, and interconnection-queue and fire-code permitting are the binding gates on deployment speed. The falling cell-cost curve is what made standalone grid-scale storage economic without subsidy in several deregulated markets over the past few years — and it shifted the segment's growth constraint from cost to permitting and interconnection.
Grid ancillary-services markets — frequency regulation, voltage support and other grid-stability services procured by the system operator — diversify operators away from pure arbitrage revenue; behind-the-meter systems reach into new customer segments entirely.
AI shows up on both sides of the ledger. On demand, AI datacenter load growth requires fast-response backup capacity. On cost, agentic AI automates dispatch optimization and bidding into wholesale and ancillary markets, compressing trading-desk headcount at storage operators — and AI-driven dispatch optimization is already in commercial use today. The two effects compound in the revenue line: datacenter operators are willing to pay a premium for guaranteed fast-response capacity, and AI-driven bidding lets a storage operator capture more of that premium by optimizing across arbitrage, capacity payments and ancillary-services markets simultaneously rather than committing to a single revenue stream.